I hear buyers and deal professionals say it all the time: "Cash flow is more important than EBITDA." I agree. But ask what that actually means from an SBA underwriting perspective, and you'll often get a vague answer. It doesn't mean lenders spend their time analyzing the U.S. GAAP statement of cash flows. Instead, they derive many of the same insights into a company's ability to generate cash by underwriting the income statement and balance sheet. They evaluate: • Recurring capital expenditures • The cash conversion cycle • The working capital required to operate the business In simple terms, they're trying to answer one question: How much of the company's earnings ultimately become cash available to operate the business and service debt? Here's a simple example. Two businesses each report $1 million of EBITDA. Business A collects receivables quickly, carries little inventory, and requires minimal recurring capital expenditures. Business B takes 90 days to collect receivables, carries significant inventory, and requires ongoing investment in equipment. On paper, both generate the same EBITDA. They may even sell for the same purchase price. But Business B requires substantially more capital just to operate. That capital has to come from somewhere. Either the seller leaves sufficient net working capital at closing, the buyer contributes additional equity, or the financing structure includes additional working capital where appropriate. In other words, you're investing more total capital to acquire the same $1 million of EBITDA. That's one reason two businesses with identical EBITDA can receive very different credit decisions. EBITDA measures operating performance. Cash flow determines how much of that performance can actually support debt. That's also why purchase price and financeable value aren't always the same.